China covid-19 outbreak halts copper price rally

Metals markets were hammered on Friday after a fresh coronavirus outbreak in China, which is responsible for more than half the world’s metal consumption, business activity numbers in Europe are at their weakest level since the recovery began in July and worries that the stimulus program of the incoming US administration may fall short of expectations.

The price of copper declined more than 2% to $3.56 a pound or $7,856 a tonne with nickel the weakest among industrial metals, declining from multi-year highs by 3% to below $18,000 a tonne.

“We are just hitting the buffers here,” Saxo Bank analyst Ole Hansen told Reuters:

“Commodities had a phenomenal run, and that just screams correction.”

The outbreak in China and the upcoming Chinese Lunar New Year holiday may curb industrial activity. This, and slow progress suppressing the virus in Europe and the United States are forcing investors to reassess copper’s near-term outlook, Hansen said.

While some of the metal price declines were pared in afternoon trade in New York, investors took the opportunity to take some profits in copper stocks, which have had a phenomenal run since the depth of the pandemic.  

Declines were lead by  KGHM, with shares in the Polish miner declining 4.5% while Chile-focused Antofagasta ended the day down close to 4% in London trading.

Ivanhoe Mines, building what could be the world’s second-largest copper mine in the Congo, dropped 4.5% before making up some of those losses before the close while Turquoise Hill, which owns the Oyu Tolgoi mine in Mongolia, gave up more than 3%.

Freeport McMoRan and First Quantum Minerals bucked the trend, and after a sharp pullback at the open, ended the day higher